Elizabeth HarrinDirector| RebelsGuideToPM.comLondon, England, United Kingdom
Doesn't the value of the project's deliverables reside with the customer department, not the PMO? We provide a service to other departments, we don't take the benefits into our own departmental P&L. Saving Changes...
Elizabeth makes a good point. Where officially do the costs and P&L go? The question really is "how is the project and/or project portfolio funded."
Summarizing Harlan's point, the PM is a resource used by the group sponsoring the project to facilitate the work (in a project format) which brings business value for that goup. Therefore, the expense is covered by the sponsoring group while the P&L is also credited to the sponsoring group.
The project or project portfolio budget is just a different view of the organizations budget which will be organized based upon the company's financial strategy (e.g. product-focus, functional-focus). In the most simplistic form, the project or project portfolio budget is covered by one area. In a more complicated form, the budget is split between areas (e.g. 50% by area 1 and 50% by area 2).
Now how is P&L credited. I only have worked at one company thusfar who had done this with any success. Would it be in the same percentages? Or a different approach. I would just say that this needs to be part of the business case presented for approval of the project. It may be different each time. At the end of the day, it all benefits the company but the reality is that department heads may fight over the monetary benefits which will have to be resolved. Saving Changes...
Harlan BridgesConsultant, Coach, Trainer, Speaker, Program Manager, Project Manager| EntrepreneurSeguin, Tx, United States
Very good discussion points. Thanks for taking the time to respond.
In my view, PMOs are little different than Marketing or Sales. In most organizations, these departments do not produce a product or service but their efforts result (hopefully) in an increase in revenue. Their objectives are often tied to the success of their efforts to increase revenue. In most organizations, Marketing/Sales are seen as revenue generators and often they do not have a P&L responsibility either.
I maintain that the results of the PMO’s efforts also result in an increase in revenue. This way of thinking about PMOs is important because it demonstrates the need for projects to be managed in manner that maximizes the return of the product of the project. Decisions made and actions taken during the project can and usually do effect the realization of benefits from the project. For instance the most important element of a project delivery may be time to market, in other words, the sooner the product is brought to market, the greater the revenue generated by the product.
As Mark Langley, the CEO of PMI has said,
“If we only speak the language of project management as in scope, time, and cost; then project management as a profession will fail today’s businesses..!”
Mr. Langley also says that it is time to change the project management triangle. The points should be Business Acumen, Leadership and Project Management.
My point is that we must change our thinking of project management. It is not only about processes and tools. We must emphasize project outcomes over process and tools. Process and tools are only the means to an end. And it is the end that is most important. A project delivered on time, on budget, and on scope that does not deliver the expected outcomes is not a successful project because it brings no value to the business. In fact, it will likely be harmful to the business by adding cost, risk and lost opportunity with no gain to the business.
Saving Changes...
Don KimPROJECT-TO-PORTFOLIO MANAGEMENT EXPERT| Seeking opportunitiesSacramento, CA, United States
I think the idea is great and is one that has been advocated throughout the PMO industry advocates. But I doubt that any PMOs out there really contribute to the P&L of a company. Especially if the PMO is for IT projects since most IT departments are tasked with "keeping the lights on", rather than aligning with a company's business strategy and/or making decision that effect P&L.
Most PMOs are tasked with prioritizing incoming project requests, managing and accounting for resources, standardizing process and governance, etc., though what most end up becoming is a central place to assign free (or mostly over-loaded) PMs to project, dispatching those projects and getting them done on time and hopefully under budget.
In my working experience, the model you outline I've only seen with true projectized companies such as construction companies where everything is predicated on ensuring construction projects taken on deliver to their bottom line. Saving Changes...
Harlan BridgesConsultant, Coach, Trainer, Speaker, Program Manager, Project Manager| EntrepreneurSeguin, Tx, United States
Don, I agree with your observations, especially with IT PMOs. The thing most organizations miss is that there are many more business projects than IT projects. It's just that most organizations don't recognize these business "activities" as projects. It didn't use to be that way, but for some reason over the last 20 years or so we have come to believe that projects are things IT does. PMOs, as entities, did not start in the IT world, but they have gravitated there over the last 20 - 25 years. Business PMOs are much more likely to be held responsible for contributing to revenue generation. Saving Changes...
Mark Price PerryBusiness Driven PMO Evangelist| BOT InternationalOrlando, Fl, United States
Harlan, great post and replies by all. While I agree with Elizabeth regarding the product of the project benefit residing with the customer/user department, I also agree with your positioning of the PMO as a business unit that generates a measurable benefit of its own. For example, when a PMO is set up by first establishing the project-related business problems/opportunities to be addressed by the PMO in the form of a PMO mandate, goals, measurable objectives to be achieved, and an assessment of the measurable benefit of having those objectives achieved, then the PMO is a "benefit generating" department. I would opt for "benefit generating" as opposed to "revenue generating" as there can be many diffferent measurable benefit types - revenue, expense, customer satisfaction, etc. But I get, and agree with your, point and much prefer to the outdated and misguided view that a PMO is the department within the enterprise that establishes standards of practice for the management of projects. Don't get me wrong, a PMO may and will do some of that, but for most PMOs those are merely the "means to the ends" not the ends unto themselves. I would hazzard to say that the success rate of PMOs (or at least the longevity of it) would greatly improve if more folks would view the PMO as you have advocated..! Thanks for sharing your post. Saving Changes...
Don KimPROJECT-TO-PORTFOLIO MANAGEMENT EXPERT| Seeking opportunitiesSacramento, CA, United States
Hey Mark, great point about "benefit generating". Though I'd hazard to guess that very few PMOs would be in the business of generating revenue, they all really should be thinking about the benefits and values that they bring. This is what would allow a PMO to be a true business oriented or driven one. Great point! Saving Changes...
